Full text: Trend and Cycle

techniques, and as the dominant motor of the business cycle,that 
is, as a factor of instability. The theory of Kalecki and others 
who identify the business cycle with fluctuations in fixed 
investment will not be impaired in this way. 
3. As soon as the subject of technology is introduced some 
unpleasant questions arise. How is technical progress to be 
measured? Where is the frontier demarkation line to be drawn 
between what is endogenous and what is exogenous, i.e. where, at 
which stage of the metamorphosis from abstract idea to concrete 
production process does technology enter the space of relations 
which we choose to define as endogenous? The metamorphosis is 
quite complicated: It starts in the field of pure science, basic 
research, goes on to applied research,from there to development 
from there to the actual commercial production by the pioneer- 
innovator and ends with the diffusion of the method. 
Of course economic factors are at work more or less all along of 
this process and special studies may deal with all the stages in 
greater or lesser depth. For macro-economic purposes and at the 
present stage of our understanding of the process, however, it is 
advisable that we should include only the last stages in a growth 
model. That means that we should regard only the investment of the 
innovator as endogenous and leave all the preceding stages 
outside even though that means, for example, regarding R&D as 
exogenous. If we choose this rather conservative and unambitious 
approach we can define technical progress by reference to the 
yearly sum of investments of an innovative character. All other 
investments would be regarded as related to diffusion. The task of 
deciding which investment is innovative and which not is thrown on 
the specialists of technology assessment. Of course one can find 
improvements of secundary importance in practically every 
investment. The decision on what is minor and what not will to 
some extent rest on judgement and common sense which does not mean 
that it is arbitrary. The importance of a new process or product 
will be judged by its consequences, that is, by the scope of 
diffusion which again can be measured in terms of the volume of 
investment. The question of measurement is in any case not new but 
has to be answered by everybody who analyses empirically the 
course of technological change. We shall take it,then, that as a 
first approach we can regard the flow of innovative investments as 
a measure of the impact of the "exogenous” factor technical 
progress.We may refine this crude concept if it is possible to 
allocate the diffusion investment which has materialised in the 
course of the years to the respective innovation which has called 
it forth. The various innovative investments can then be given 
their due weight corresponding to their importance in the total 
development. The investment in the first motor car factory, for 
example, will only in this way be given its due weight which can 
of course only be established ex post.For innovations which are in 
an early stage of development the weight attributed to them will 
have to be based on guesswork.

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